Deutsche Bank out on Comverse (NASDAQ:CMVT), noting that A few weeks ago we attended the CTIA Wireless 2006 Conference in Los Angeles, and took the opportunity to do some field checks around Comverse. Additional due diligence performed in the following weeks has led us to believe that the business continues to be strong, and the soon to launch new Integrated Messaging platform is now mature enough to generate solid demand in '07.
Firm continues to see several new Comverse bright spots to watch that are starting to generate growth: MMSC, MAG, push-mail and ringback tones among others. All our company business checks have come in strong, with the only weak spot being the ringtone market where the company does not play.
Firm's field checks during and after the conference support their view that the company's bookings recognition criteria are being applied more stringently. They believe this is important because in their calculation organic backlog growth declined again sequentially to 10% from 15% last quarter, which otherwise would seem to indicate a slowdown in business momentum. If indeed the backlog recognition criteria have somewhat become more strict (and they think not likely in effect for two entire quarters), then the yearly comparables become less relevant.
Maintains Buy rating with $37 tgt they as are increasingly encouraged that the business is strong and continues not to be impacted from the ongoing stock options investigation.
Notablecalls: While nothing materially new, it looks as the guys frm Deutsche did do some due diligence. They have been right on the stock and I agree with them that the stock is heading north. From trading perspective, expect a small pop, but that's about it.